TORONTO (Reuters) - Sales of existing homes in Canada fell 4.5 percent in January from December, the Canadian Real Estate Association said on Wednesday in the latest sign the once hot market is cooling.
The industry group also said the number of newly listed homes edged down 1.4 percent on a month-over-month basis.
On a year-on-year basis, however, sales (not seasonally adjusted) were up 4 percent from January 2011, and stood even with the five- and 10-year averages for the month.
Despite the drop from December in the number of sales, recent CREA data showed that Canadian home prices actually rose in January on a monthly basis for the first time in three months, led by gains in Montreal, Toronto and Vancouver.
The average sale price was C$348,178, up 1.2 percent from a year earlier. The industry group said this was one of the smallest increases since late 2010.
“Year-over-year comparisons in the national average price are expected to become volatile and may turn negative, reflecting average price developments in the first half of 2011 in Vancouver,” CREA’s chief economist, Gregory Klump, said in a statement.
Klump added that a surge in sales in Vancouver’s priciest neighborhoods in 2011 pushed up the average price nationally, but that a replay is not expected this year.
“The national housing market is stabilizing and remains well balanced,” Gary Morse, CREA’s president, said in a statement. “That said, forecasts for economic and job growth going forward vary widely for different parts of the country, suggesting a possible continuation of a softening trend in some markets.”
Experts have been calling for a slowdown in the housing sector for months, pointing to high real estate prices at a time when household debt levels have hit record highs.
The market has been sustained by ultra-low interest rates since the financial crisis began in 2008 and the Bank of Canada is widely expected to keep its main policy rate at its current 1 percent target through 2013.
“Despite our expectation that the low interest rate environment will persist for the foreseeable future, increased vigilance from regulators and a diminished capacity for households to stretch their balance sheets underscore that housing activity will wane,” Mazen Issa, Canada macro strategist at TD Securities, said in research note.
Earlier this week, Canada Mortgage and Housing Corp (CMHC) forecast the average home price will rise in each of the next two years, but said housing starts and sales of existing homes will be little changed over the same period.
A cooler property market would be welcomed by Canadian policymakers, who fear the market’s post-recession boom, combined with the long run of low lending rates, could create a fresh asset bubble.
“While policymakers and pundits have been wringing their hands in anguish over the possibility of a Canadian housing bubble, the facts on the ground send a much calmer message,” Douglas Porter, BMO Capital Markets deputy chief economist, said in a research note.
Editing by Jeffrey Hodgson and Peter Galloway